The Irish Department of Finance (DoF) has released Exchequer Returns for the month of January. The release itself reflects a number of distortions, with delays arising from the introduction of the Single European Payments Area (SEPA) regulation and last year’s receipt of €1.1bn from the sale of State-owned Contingent Convertibles in Bank of Ireland to the fore.
Thus, the headline worsening of the Exchequer outturn to a deficit of €1.1bn in January 2014 from a surplus of €0.7bn in the same month last year does not reflect the underlying dynamics in the public finances.
On the revenue side, total tax receipts were €3.1bn in January 2014, a €644m or 17.1% reduction on year-earlier levels. The DoF had guided that SEPA would cause a temporary delay in the receipt of amounts due from multiple tax headings, including Income Tax, VAT and Corporation Tax. Thus, few meaningful conclusions (even allowing for the early stage of the year) can be drawn from the performance of most of the individual tax headings during January. With that being said, we note that Excise duties were €24m or 7.4% above year earlier levels, helped by tax hikes in Budget 2014 and a recent spike in car sales (SIMI data show a 33% y/y rise in new car sales in January), a welcome turnaround from the soft performance from that heading in December’s Exchequer Returns.
The DoF noted that “€527m was collected on the first banking day of February compared to €80m in 2013”, adding that “most” of the SEPA-delayed monies have now been received. Stripping out the impacts of the stamp duty one-off in January 2013 (due to a change in the treatment of health levies) and SEPA, “tax revenues proper to January 2014 are expected to have grown by about 5% y/y”.
In terms of non-tax revenues, these were largely unchanged (-€4m or -1.6% y/y) despite a slump in receipts (from €210m in January 2013 to €56m last month) from the ELG scheme, which was closed to new liabilities from March 2013. The shortfall here was made up by a €153m special dividend from the ESB.
Excluding the sinking fund payment, capital receipts halved from €1.6bn in January 2013 to €0.8bn last month, with the main driver here being the CoCo proceeds noted above.
On the expenditure side, net voted (discretionary) expenditure was up €152m y/y (+3.8% y/y). Current expenditure rose €127m y/y while capital expenditure was €25m above year-earlier levels. The biggest change was seen in the Department of Social Protection, where spending was €145m or 12.3% higher y/y, but here we note that the monthly outturn was impacted by an additional weekly payday in January 2014 (five versus four in the same month last year) for certain social welfare recipients, while SEPA issues led to a slight delay in the pay-over of PRSI receipts, factors which will unwind later in the year. The DoF also attributed improved efficiency in the processing of student support payments as a factor behind the rise in outlays, again this is a timing issue and not one that will impact overall annual expenditure.
Elsewhere, we note that interest payments on the national debt were down sharply in January 2014 (€356m versus €558m in January 2013). This was helped by the early redemption of €4.1bn of the January 2014 Irish Treasury Bond in December.
All in all, with timing issues and one-off items skewing much of this evening’s release, few conclusions can be drawn from the figures themselves, particularly given how early we are into the new tax year. However, we do draw comfort from DoF guidance that underlying revenues were up about 5% y/y while underlying discretionary expenditure looks to be flat compared to year-earlier levels. We look forward to further Exchequer Returns over the coming months to see if the pick-up in the economy is indeed translating into an meaningful improvement in Ireland’s fiscal performance.
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